ACC620 - Legitimacy Theory: Basis for Carbon Disclosure Law?

This report explores the potential of legitimacy theory as the foundation for new environmental legislation mandating companies to disclose their carbon performance quarterly. It highlights the increasing global concern regarding carbon emissions and the role of businesses in contributing to climate change. The legitimacy theory suggests that firms must operate within societal norms and values, including environmental responsibility, and accurately report their carbon footprint to maintain their legitimacy. The report discusses the practical and theoretical motivations for such legislation, including growing environmental concerns, respiratory health issues, and the need for organizations to legitimize their operations. It reviews existing literature on the legitimacy theory and its application to carbon accounting, emphasizing the importance of truthful reporting and effective carbon management control systems. The report concludes by proposing hypotheses related to the effectiveness of stringent laws based on legitimacy theory in motivating improved carbon performance disclosures and the role of top management in achieving these disclosures. Desklib offers a wide array of solved assignments and past papers for students.

Running head: RESEARCH PROJECT
Research Project
Name of the student
University name
Author’s note

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Table of Contents
1. Summary............................................................................................................................2
2. Conceptual model...............................................................................................................2
3. Practical motivation...........................................................................................................3
4. Theoretical motivation.......................................................................................................3
5. Literature review................................................................................................................4
Base theory –legitimacy theory..................................................................................................4
Seminal articles..........................................................................................................................4
6. Hypothesis..........................................................................................................................5
7. Proxy Measures for Theoretical Constructs.......................................................................6
Theoretical constructs................................................................................................................6
Stringent laws directing firms to disclose their carbon performance.........................................6
Improved carbon performance of the firm.................................................................................7
8. Research method................................................................................................................7
Summary................................................................................................................................9
References............................................................................................................................10

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Title: Theoretical constructs in forming new law as per which firms are required to disclose
their carbon performance on a quarterly basis?
1. Summary
The current assignment focuses upon the legitimacy theory which has used to analyse the
legal frame work within a business organization. In this respect, the legitimacy theory will be used by
the researcher as a base for a new law. As per the legitimacy theory, a business organization is
required to report their carbon performance (Hagstrom and Engman 2017). The legitimacy theory is
the one of the most cited theories within social and environmental accounting g area. It laid much
importance upon the voluntary disclosures of organization towards maintaining the corporate social
responsibility (Busch and Kolbel 2016). There has been growing environmental concerns regarding
carbon emissions. Hence, the researcher will evaluate whether the theory could form the basis of new
environmental laws.
2. Conceptual model
Legitimacy theory
Stringent laws directing firms to
disclose their carbon performance
Improved carbon performance of
the firm
Reduction in
the rate of
environment
pollution

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(Source: author)
3. Practical motivation
 There has been growing concerns regarding the huge rate of carbon emissions released by
business firms and organizations.
 Some of these have been contributing significantly to the growing concerns of global
warming.
 The global warming and the emission of some of the green house gases have been seen to
enhance the rates of respiratory tract infections (Bae Choi et al. 2013).
 Some of the firms have been specifically investing in environmental [projects to reduce their
carbon footprints with the help of refined technologies (Freedman and Park 2014)
 Due to increased pressure from the media and concerns expressed by social activities some
firms have introduced a number of environmental campaigns. However, most of these have
laid to inaccurate reporting (Guenther et al. 2016)
4. Theoretical motivation
 Low legitimacy could have dire consequences for organizations which can affect their rights
to operate within a global scenario (Bae Choi et al. 2013).
 Legitimacy is an abstract concept and the view differs based upon the observer (Tauringana
and Chithambo 2015)
 Legitimacy can help the organizations achieve resources for operating (Prasad et al. 2016).
 Some of the previous researches have failed to address the way in which business firms can
implement the legitimacy theory and guidelines in order to meet the legal requirements.
5. Literature review
Base theory –legitimacy theory
A business firm or organization is operating within a large social circle and is duly affected
by various processes of the social realm. Hence, the organization is entitled to give back to the

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society by way of its products and services. However, the value added services of the organization
should be designed in a manner so that possesses little threat to the environment, which is in
accordance with the corporate social responsibility (Malarvizhi and Matta 2016). As per the
legitimacy theory the business firm needs to acts in accordance with the social beliefs and overall
social well being objectives (Higgins and Larrinaga 2014).
Seminal articles
 The organizations need to legitimize their actions by showing responsiveness to the
environmental issues (Ahmadi and Bouri 2017).
 The need to legitimize the actions of the company is the primary motivation behind
voluntary corporate social disclosures
 Maintaining legitimacy is challenging for an organization as the expectations and values of
the society can change over time (Mir et al. 2015).
 Each and every organization is individually responsible for contributing towards the
environment by virtue of its products and services
 The moralist model states that responsibility to the environment is an obligation to the
society as well as the stakeholders
 The business firms worldwide have placed immense importance upon the use of carbon
accounting system for development of an effective strategy for reducing the carbon
footprints of an organisation
 The ratification of KYOTO protocol with emission trading scheme (ETS) have mentioned
carbon emissions as bringing risk opportunities to the organization (mfe.govt.nz 2018).
 The firms have focused upon the importance of internal carbon reduction by implementing
combustion emissions reduction, process emissions reduction, lowering product output.
 The hydrocarbons form an inevitable part of certain products. Therefore, every time the
products are synthesized huge amount of free carbons are released into the environment. in
order to reach out to the maximum number of target customers an organization also needs

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to double its production rate, which further leads to the development of an ethical dilemma as
it is not meeting with its target of low carbon footprints(Higgins and Larrinaga 2016)
 Therefore, the organizations have often been seen to provide false data regarding
environmental regulations compliance rate (Tauringana and Chithambo 2015).
 The legitimacy theory emphasises upon balanced and truthful reporting rather than putting or
highlighting false and boastful data (Abeysekera 2013).
 The firms have emphasized upon the importance of carbon management control systems,
which are information based routine and procedures which managers use to change patterns
of organizational activities (Grauel and Gotthardt 2017).
 As per the Kyoto protocol there has been more emphasis upon the use of green business and
energy efficient systems for reduction in the rate of carbon emissions (mfe.govt.nz 2018).
 In the absence effective legal guidelines and structure most firms are reluctant to invest in
carbon reduction technologies (Metaxas and Tsavdaridou 2017).
6. Hypothesis
Hypothesis 1: the stringent law sets based upon the legitimacy theory can be used to motivate the
firms to offer improved carbon performance disclosures.
Hypothesis 2: The newly developed laws cannot help the firms achieve improved carbon disclosures
until and unless there is sufficient contribution from the top management
7. Proxy Measures for Theoretical Constructs
Theoretical constructs
The theoretical constructs will be further divided into dependent and independent variable by
the researcher and will be further evaluated using a number of proxy measures. The independent

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variable over here is the stringent laws directing firms to disclose their carbon performance. The
dependent variable is expressed in the form of improved carbon performance of the firm.
Stringent laws directing firms to disclose their carbon performance
 New Zealand has stressed upon the importance of eco-innovation policies. Some of these
policies are aimed at reducing the amount of carbon footprints.
 Measures have been taken by companies to promote capital investment in carbon reduction
technologies (Chua 2016).
 However, there is misbalance regarding the establishment of green procurement initiatives at
the local and national level.
 The institutional problems related to intellectual property rights have been seen to further act
as barriers in the achievement of the green goals of the organization (Abeysekera 2013)
 As per the resource management act (1991), environmental management was found upon the
subsidiary principle (mfe.govt.nz 2018).
 As per the Newzealand energy strategy very business firm or organization needs to pass the
suitable standards of carbon emissions and present a detailed report o the same (Bepari and
Mollik 2016). However, failure to comply with the legal framework makes the attainment of
the goal difficult for the organization. The failure could be attributed to the lack of interest on
the part of the management (mfe.govt.nz 2018).
Improved carbon performance of the firm
 It has been seen that the organizations acting in accordance with the NewZeland based energy
strategies have been seen to perform better.
 The disclosure behaviours of the firms have been taken as positive motivation for the rest of
the firms to follow (Rahim 2013).

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 However, reports in the past have highlighted that many firms practice poor disclosure and
provide wring boastful figures to the media just to evade the legal barricades (Haque . and
Islam 2015)
 Almost 43.7% of the excessive carbon generation have been seen to be reduced with the
implementation of effective environmental framework and guidelines (Bae Choi et al. 2013).
Theoretical
Construct
Proxy measure Dependent (DV),
Independent (IV),
or Control Variable
(CV)
Source
Stringent laws for
carbon performance
disclosure
So2 emissions Independent variable (motu.nz 2018)
Improved carbon
performance
Pollution scores Dependent variable (mfe.govt.nz 2018)
8. Research method
For the current proposal, the researcher will use a secondary research design where he will be
collecting data from a number of evidence based journals as well as consult government reports and
factsheets. The methodology adopted over here could be divided into a number of components such
as- research philosophy, approach of the research, research design, research strategy, data analysis
tools, research ethics.
The researcher will adopt interpretivism research philosophy over here. Thus, the data will
be gathered by the researcher from practical scenario by integrating human subjects into the study
design. It helps in qualitative data analysis and presentation (Smith 2015).
The researcher will adopt an inductive approach over here which will help the researcher on
in collecting data and analysing themes based upon the case study analysis. The inductive approach
starts with the observations and the theories are suggested at the end of the research process (Bryman
and Bell 2015).
The researcher will use a descriptive research design for conducting the study. The
descriptive research design will help in the researcher in identification of the existing relationship

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between variables and thus understand the effect produced on a variable by manipulating the other
variable. The researcher will use literature review for collating of the data and analysing those making
themes.
The researcher will use case studies and published literature sources for the collection and the
presentation of the data. The researcher will use secondary databases for the collection of facts and
data. Some of the secondary databases which will be used by the researcher over here are NCBI,
ELSEVIER, etc. The researcher will use a number of keywords for locating or finding out the exact
journals. Additionally, the researcher will use a number of filters such as articles published in English
only will be considered by the researcher. Moreover, the articles published within the last ten years
will only be taken into consideration. The researcher will therefore mainly focus secondary research
design for the collection of data.
The researcher will use case study analysis for the collection of effective data. The researcher
will further group the data intro similar dissimilar themes. They will be used to perform a thematic
analysis by the researcher.
The research ethics forms an important part of the entire research study. In this respect, the
researcher needs to be careful while analysing the data from the case studies. At no point of time the
exact name of the participants will be used by the researcher as this will be treated as an ethical breach
(Berger 2015). Before publishing the research data the review board will need to ensure that
anonymity is maintained. In case the secondary data is freely available over internet, books or other
public platform for re-using them further permission will need to be collected by the researcher.
Summary
Therefore, the study undertaken here focuses upon the use of legitimacy theory for
development of stricter legal framework aimed at reducing the carbon footprints generated by a firm.
Studies and reports have depicted that inspite of strict legal implications many companies fail to meet
the environmental protection laws and regulations (Herbohn et al. 2017). The research here
emphasizes upon the importance of legitimacy theory in the drafting of an effective legal framework

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for reducing the rate of carbon emissions. However, most of the firms have been seen to practice poor
disclosure norms which violate the legitimacy theory. The legitimacy theory on a whole emphasizes
upon the CSR rules and guidelines thereby maintaining the environmental norms as well as follows
the transparency norms while drafting of the carbon reports (Breitinger and Bonardi 2017).However,
both the legal framework and the improvements in carbon performance are directly proportional
(Elijido-Ten and Clarkson 2017). Therefore, a stricter imposition of the legal policies can contribute
positively towards the environment.

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References
Abeysekera, I., 2013. A template for integrated reporting. Journal of Intellectual Capital, 14(2),
pp.227-245.
Ahmadi, A. and Bouri, A., 2017. The relationship between financial attributes, environmental
performance and environmental disclosure: Empirical investigation on French firms listed on CAC
40. Management of Environmental Quality: An International Journal, 28(4), pp.490-506.
Bae Choi, B., Lee, D. and Psaros, J., 2013. An analysis of Australian company carbon emission
disclosures. Pacific Accounting Review, 25(1), pp.58-79.
Bepari, M.K. and Mollik, A.T., 2016. Stakeholders’ interest in sustainability assurance process: An
examination of assurance statements reported by Australian companies. Managerial Auditing
Journal, 31(6/7), pp.655-687.
Berger, A.A., 2015. Media and communication research methods: An introduction to qualitative and
quantitative approaches. London: Sage Publications, pp.93-105.
Breitinger, D. and Bonardi, J.P., 2017. Firms, Breach of Norms, and Reputation Damage. Business &
Society, p. 531.
Bryman, A. and Bell, E., 2015. Business research methods. Oxford University Press, USA, pp.102-
212.
Busch, T. and Kölbel, J., 2016. Paper 3: How risky is your business? The role of institutional context,
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Chua, J.F., 2016. Corporate liability and risk in respect of climate change. NZJ Envtl. L., 20, p.167.
Elijido-Ten, E.O. and Clarkson, P., 2017. Going Beyond Climate Change Risk Management: Insights
from the World’s Largest Most Sustainable Corporations. Journal of Business Ethics, pp.1-23.

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Freedman, M. and Park, J.D., 2014. Mandated climate change disclosures by firms participating in the
regional greenhouse gas initiative. Social and Environmental Accountability Journal, 34(1), pp.29-44.
Grauel, J. and Gotthardt, D., 2017. Carbon disclosure, freedom and democracy. Social Responsibility
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Guenther, E., Guenther, T., Schiemann, F. and Weber, G., 2016. Stakeholder relevance for reporting:
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Hagström, L. and Engman, D., 2017. Disclosure Trends in CSR Reporting: Reporting Practices in the
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Climate Accounting (pp. 243-257). Springer, Cham.
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Evidence from New Zealand local governments. Asian Review of Accounting, 23(1), pp.17-38.